The London Borough of Waltham Forest Pension Fund's investments were valued at £1,131.6m on 31 December 2024. The meeting was also scheduled to consider the Pension Regulator's new General Code of Practice and a response to a consultation by the Ministry of Housing, Communities and Local Government (MHCLG) on reforming Local Government Pension Schemes (LGPS).

Investment Performance

The report pack included an update on the Pension Fund's investment performance.

As at 31 December 2024 the fund had returned 2.9% over the quarter, underperforming against the benchmark of 3.6% by 0.7%. Over 12 months the fund returned 9.9% underperforming the benchmark of 14.1% by 4.2%.

The report pack says that the strategic performance target for the fund to recover its deficit is CPI + 2.25% (5.35%). The report pack says this target was set in the Funding Strategy agreed following the 2022 triennial valuation. It adds that the fund is not currently on target to meet this strategic target, and its 3-year return was 1.4% p.a.

The report pack contains an analysis of the performance of the investments managed by each of the fund managers.

The report pack highlights that the Darwin Leisure Property Fund had seen serious performance issues and that the annualised return over three years was -19.6%. It says that the fund submitted a request to redeem the 'D' units, which it says amounts to around three-quarters of holdings. The report pack says that Darwin Leisure had indicated that they would defer this redemption.

The report pack suggests that the fund may wish to consider submitting a request to redeem the 'K' units, which it says would incur a 1% penalty, because:

Following the Q3 2024 performance and in light of conversations so far between the Officers, Mercer and Darwin, we believe there is the potential that the Darwin Leisure Fund could become a going concern.

The report pack says that John Raisin Financial Services Ltd, the independent advisor to the pension fund, the Assistant Director of Pensions and Treasury Management, and the Pension Fund Manager had met with each of the fund managers to review performance.

The report pack suggests that the Committee continue regular dialogue via the officers’ concerning performance of the fund managers and that managers that are under performing should also be invited to future meetings.

Pension Administration Service

The report pack contains an update on the work of the Pension Shared Service (PSS) which administers the Pension Fund on behalf of the Council.

It says that the service had been performing to a high standard and was exceeding its performance targets.

The report pack says that the PSS had achieved the highest level of assurance 'substantial assurance' from a recent Internal Audit.

It says that the PSS had been implementing the McCloud Remedy since it became law in October 2023.

The report pack says that the Pension Fund data quality tests for both common and specific data had been processed and reported to the Pensions Regulator. It says that the fund was devising a fresh data improvement plan and that the scores were 95.9% for common data and 86.1% for scheme specific data.

The Pension Regulator General Code of Practice

The report pack contains a report on the Pension Regulator's new General Code of Practice.

The General Code of Practice replaces 10 existing Codes of Practice and came into force on 27 March 2024.

The report pack says that the code covers 6 key areas:

Internal Controls

Risk Management Function

Management of Activities

Investment Matters

Communication and Disclosure

Funding

The report pack explains that the new Code includes modules on Cyber Controls and Scams.

It says that fund officers, in consultation with Mercer and the Pension Shared Service, had evaluated the Pension Fund's compliance with the code.

The report pack says that:

Following this the fund officers have developed an action plan ... to address any specific area’s that need to comply to the General Code requirements or need further work to be fully compliant.

Expense Budget Setting

The report pack contains a proposed expense budget for the Pension Fund for 2025/26.

The report pack explains that:

The Pension fund committee has been focussing on the performance of the assets and the liabilities of the fund to reduce the deficit which is well underway. The next focus from a financial control point of view is to grip the fund expenses, to put an annual budget in place and to ensure that the budget and outturn are reported quarterly with insightful variance analysis to enable the committee to make expense decisions with the financial impact clearly understood.

It reports that the outturn for 2024/25 was £2.225m and that the proposed budget for 2025/26 is £2.099m, a reduction of £125,309. It explains that the reduction was achieved through a combination of renegotiating contracts with external advisors, a reduction in the scope of some reports, and the completion of a number of projects.

The report pack says the proposed budget includes £150,000 for ad hoc support and suggests that the Council's Section 151 Officer, Rob Manning, be given delegated authority to spend this money.

Consultation Response

The report pack contains the Pension Fund's response to a consultation by the MHCLG entitled 'Local Government Pension Scheme (England and Wales): Fit for the Future'.

The report pack explains that the consultation sought views on proposals relating to the investment of LGPS assets, specifically the areas of:

asset pooling, UK and local investment and Governance.

It explains that MHCLG was consulting on 3 sets of proposals:

• Reforming LGPS asset pools by mandating minimum standards for their operation.
• Boosting investment by LGPS in their localities and regions.
• Strengthening the governance of LGPS Administering Authorities and asset pools.

The report pack says that the Pension Fund's response to the consultation was drafted by the Pension Officer and the independent Advisor to the Pension Fund and approved by Rob Manning and the Chair of the Pensions Committee.

Draft Pension Board Annual Report 2024/25

The report pack included a draft of the Pension Board's annual report for 2024/25.

The report provides a summary of the membership, function and operation of the Pension Board.

It describes the work of the board during its 3 meetings, held in June and November 2024 and March 2025. It also lists the attendees for each of these meetings.

The report notes that one member had left the Board and 4 new members had joined.

The report states that the board's training policy:

is based on an individual training needs analysis (TNA) and is therefore being individually tailored. This allows use of both the CIPFA Framework and the Pension Regulator’s Toolkit/Hymans online training modules.

It adds that:

Board members are encouraged to attend the LGA Fundamentals training each year along with completing and continuing the Hymans online training.

External Audit Update

The report pack included an update on the progress of the fund's external audits.

It notes that:

External Audits were signed of by Ernest and Young as follows below:

20/21 13 August 2024

21/22 12 December 2024

22/23 12 December 2024

It adds that KPMG were appointed as the external auditors for the 23/24 audit, and that:

23/24 accounts were signed of by KPMG on 28th February 2024.

Independent Advisor to the Pension Fund Committee

The report pack included an update on the appointment of an Independent Advisor to the Pension Fund.

The contract with the incumbent independent advisor, John Raisin Financial Services Ltd, was due to expire in November 2020. The report pack says this contract had been extended until September 2023, and had continued on a rolling basis while a procurement process to appoint a new provider was undertaken.

The report pack says a procurement process to appoint a new Independent Advisor to the Pension Fund commenced in January 2025, with applications closing on 19 February 2025.

The report pack says 4 eligible applications were received, and John Raisin Financial Services Ltd was selected as the preferred provider.

The report pack says that the successful applicant will be paid a base fee of £26,500 per annum plus VAT.